Key Takeaways
- Under current IRS rules, using crypto to buy anything — even a $5 coffee — triggers a capital gains calculation, just like selling stock.
- The PARITY Act, reintroduced in May 2026, would exempt regulated stablecoin transactions under $200 from capital gains reporting, and a companion industry proposal sets a $600 threshold for Bitcoin.
- Tether (USDT) would not qualify for the stablecoin exemption under the current bill's language — only GENIUS Act-licensed issuers would.
- The PARITY Act has not passed. Current law still requires tracking every transaction. The legislative window may close when Senator Lummis leaves office in January 2027.
The Tax That Surprises Most Crypto Users
Imagine paying for a $5 latte using Bitcoin. You tap your phone, the barista hands over the cup, and you think nothing of it. Under current IRS rules, you just triggered a taxable event — legally equivalent to selling a stock.
The IRS has treated cryptocurrency as property since 2014. That means any time you dispose of crypto — including spending it at a coffee shop — you must calculate the difference between what you paid for it and what it was worth when you spent it. If there's a gain, you owe capital gains tax.
Alice, for example, acquired Bitcoin at $95,000 per coin. When BTC hits $100,000 and she spends $5 worth, the gain embedded in those satoshis is technically taxable income. On a cup of coffee.
This single rule is why crypto has never really worked as everyday spending money in the US.
How the Current IRS Rules Work
The IRS requires you to report a capital gain or loss every time you dispose of cryptocurrency — whether you sell it for dollars, swap it for another token, or use it to buy something. There's no minimum threshold. A $3 app purchase using ETH is a taxable event by the same rules that govern a $50,000 BTC sale.
Most casual users have no idea. And because crypto isn't currently subject to wash sale rules the way stocks are, you can sell at a loss and immediately repurchase to harvest a deduction — something stock investors can't do. But that's cold comfort when you're trying to figure out whether your morning coffee created a reporting obligation.
If you've been spending crypto without tracking every transaction, our complete guide to crypto taxes in 2026 covers what you're required to report and what the penalties look like.
What the PARITY Act Would Change
The PARITY Act — formally reintroduced in May 2026 by Reps. Horsford, Miller, DelBene, and Carey — directly targets this problem with two mechanisms.
For GENIUS Act-regulated stablecoins: The bill would establish a deemed-basis rule, treating compliant stablecoins like cash for tax purposes. Transactions under $200 would require no capital gains tracking at all. Bob paying $120 for groceries with USDC? No reporting required. No spreadsheet.
For Bitcoin and large-cap crypto: A coalition of seven organizations — including Block (Jack Dorsey's company), River, MoonPay, and the Bitcoin Policy Institute — held a rally at the Bitcoin 2026 conference in April pushing a higher $600-per-transaction, $20,000-per-year exemption for Bitcoin and any cryptocurrency with a market cap above $25 billion (trailing six-month average). That $20,000 annual cap translates to roughly $3,000 in exempted capital gains per year — designed for everyday spending, not large transfers.
The PARITY Act would also apply the standard wash sale rule to crypto for the first time. That's a direct tradeoff: small-purchase relief in exchange for closing the immediate-repurchase loss harvesting strategy.
The Fine Print: Not Every Stablecoin Qualifies
The PARITY Act's stablecoin exemption only covers GENIUS Act-regulated payment stablecoins — tokens issued by federally licensed entities that hold a $1.00 peg within 1% for at least 95% of trading days in the prior year.
Tether (USDT) would not qualify under the current draft. It lacks a US federal license. USDC, issued by Circle — which received OCC conditional approval under the GENIUS Act framework — would likely qualify. For a detailed look at what GENIUS Act licensing actually requires from stablecoin issuers, we've covered that separately.
If you primarily use USDT for daily payments, the bill as written doesn't change your situation.
The Staking Tax Trap
The PARITY Act also addresses a lesser-known problem: phantom income from staking rewards.
Under current rules, if you earn 0.5 ETH in staking rewards when ETH is priced at $3,000, you owe income tax on $1,500 the moment those rewards arrive — even though you never sold anything or received cash. The PARITY Act would let you elect to defer that tax for up to five years, or until you actually sell the rewards. For anyone earning yield through crypto staking and holding long term, that's a meaningful change.
What You Should Do Right Now
One thing needs to be stated clearly: the PARITY Act is not law. It has been introduced in the House but hasn't passed either chamber. The stablecoin safe harbor, the $600 Bitcoin threshold, the staking deferral — none of it is in effect. Under today's rules, every crypto transaction still requires capital gains tracking.
That compliance burden is real, especially for anyone who's used crypto regularly. CoinLedger can automatically import transaction history from most major exchanges and wallets, calculate the gain or loss on each spend, and produce the reports needed at tax time — without requiring a manual log of every coffee or grocery run.
Even if the PARITY Act passes this year, it would apply to future transactions. Past purchases remain your responsibility under existing rules.
The Window Is Closing: Why 2026 Matters
The PARITY Act has something rare for crypto legislation: genuine bipartisan House cosponsors. A seven-organization coalition publicly lobbied Congress at Bitcoin 2026 in April. A May 20 CoinDesk report confirmed the bill is in active House deliberation, and Congress has directed the IRS to model what a small-transaction relief threshold would look like — a signal that the groundwork is being laid.
The urgency is real. Senator Cynthia Lummis, the Senate's most prominent crypto tax reform champion, leaves office in January 2027. Any bill that doesn't clear this Congress resets entirely in 2027 with a new Senate and different priorities. That makes the next several months the most realistic legislative window this issue has had in a decade.
Germany already exempts crypto gains under €600 per year and eliminates capital gains entirely for crypto held over one year. The US currently has no threshold for any transaction type. The PARITY Act is the most direct path to closing that gap — but until it passes, every satoshi you spend at the register still counts.